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ICTforAg Case Study: Success with Electronic Vouchers for Farmers in Mozambique

By Guest Writer on June 11, 2018

mozambique electronic voucher

In Mozambique, approximately 4 million farm units are responsible for around 95% of national agricultural production, cultivating an average of 1.5 hectares/family.  Smallholder farmers are responsible for ensuring good part of the food and nutrition security in the country, in and employing about 81% of labour force at national level.

Agriculture provides farming households’ main source of income, and supports nearly all the household activities, but just barely. Families consume what they grow, trade their farm surplus for other necessities and sell their crops for income.

However, households often fall short of their monthly needs. Although, they work hard and have high aspirations most of the households live at or below the poverty line, and many live in extreme poverty.

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Smallholder farmers do not use formal financial services such as bank accounts, mobile money or microfinance institutions (MFIs) and often live far from banks and microcredit institutions branches. The majority of smallholder farmers has never been in a bank and most are not aware of the opportunities of mobile money.

In sum, smallholders often manage their household finances outside any formal channel and very few rely on local, informal lending, savings circles, or similar mechanisms.

An Experiment with Electronic Vouchers

In 2014, the Government of Mozambique and FAO agreed that targeted “smart subsidies” using e-vouchers coupled with a participatory agricultural extension approach (FAO Farm Field Schools), could be a powerful tool to facilitate farmers’ access to seeds, fertilizers and other inputs needed to increase production and productivity.

In an effort to overcome financial barriers, FAO within the framework of the Millennium Development Goal1c Programme launched at the beginning of the agricultural season 2015/2016, an electronic voucher (e-voucher) scheme with the dual objectives:

  • Improve access and use of quality agricultural inputs (e.g. seeds and fertilizers), and
  • Strengthen the distribution chain of agricultural inputs through the involvement of various actors including agro-dealers (shops and retailers selling agricultural inputs at district level) and input producers (seed and fertilizer producers).

The e-voucher system is a flexible market development tool that allows farmers to buy certain types of inputs from agro-dealers that accept the e-vouchers as partial payment. The agro-dealers redeem the e-vouchers based on a settlement report that is produced every two weeks by the system. To avoid market distortions the prices of the inputs available at the agro-dealer’s shops are in line with the prevalent market prices in the region.

The e-voucher scheme, the first of its kind in Mozambique, has been developed by FAO in cooperation with ADM tested in Manica Province during the agricultural campaign 2015-2016 and is currently used in Manica, Zambezia, Nampula and Sofala provinces, reaching over 23,000 beneficiaries who are also for the most part members of the FAO Farm Field Schools.

The FAO e-voucher targets two groups of beneficiaries:

  • Subsistence farmers who are entitled to package A of inputs and
  • Small emerging farmers entitled to package B of inputs, with special attention to rural women and women heads of families.

The programme is implemented in eleven districts of four provinces in Mozambique:

  • Manica (12,500 e-cards): Barue, Gondola, Manica and Sussundenga
  • Sofala (7,850 e-cards): Buzi, Gorongosa, Maringue and Nhamatanda
  • Zambezia (1,600 e-cards): Alto Molocue and Gurué
  • Nampula (1,200 e-cards): Ribaue

Types of e-Voucher Packages

The technical packages provided under the e-voucher are designed/recommended for the cultivation of 0.5 ha per beneficiary. The list of inputs differs from district to district depending on agro-ecological conditions, MASA’s priorities, farmers’ preferences and availability. The inputs are identified in coordination with the MASA at different levels (local, provincial and national), as well as with agro-dealers and farmer associations.

  • Package A: Subsistence Farmers. With an approximately value of 35 USD for the purchase of open pollinated seeds (OPV) of maize and beans and post-harvest insecticides. Farmer’s contribution = approximately 30% of the value of the package
  • Package B: Emerging Farmers. With an approximately value of 130 USD for the purchase of seeds of maize (hybrid or OPV), beans, oleaginous, fertilizers, etc. Farmer’s contribution = approximately 50% of the value of the package

Currently, the e-voucher scheme involves approximately 100 agro-dealers selected in close coordination with the MASA and based on specific criteria. A contract is signed between FAO and the agro-dealer to ensure that the technical specifications and quality standards of inputs provided to the beneficiaries are met. The agro-dealers must keep track of the information on lot number, species, varieties and supplier companies.

mozambique electronic voucher

How Much Does the e-Voucher System Cost?

The overall cost of the e-voucher scheme for one year to cover 23,000 beneficiaries is approximately USD 1,950,000. Total costs divided between the two categories are as follows:

  • Package A: USD 62.00/beneficiary for 14,000 Subsistence Farmers = USD 1,170,000
  • Package B: USD 108.00/beneficiary for 9,000 Emerging Farmers = USD 780,000

The costs include all the expenses incurred for the implementation of the system; software, subsidies, consultancy, technical assistance, procurement of goods, travel, etc.

The Impact on Production and Productivity

FAO monitored the number of vouchers exchanged in the same districts during the last three agricultural campaigns, moving from approx. 1,400 vouchers in 2013/2014 to approx. 16,800 in 2016/2017.

The increase in numbers of vouchers exchanged was also accompanied by an increase of beneficiaries moving from the package A to the package B. In other words, FAO observed a significant increase of the number of farmers who transitioned from subsistence to commercial farming. In the agricultural campaign 2016/2017 the preference for the package B was approx. 51% against 49% of preference for package A.

Within the e-Voucher programme, most of the beneficiaries of the e-voucher are also members of the Farm Field Schools (FFS) where they learn and put into practice new cultivation techniques and test new varieties of crops, among other activities.

For example, with the use of improved seeds and cultivation techniques, the beneficiaries of the e-Voucher increased their yield from maize from an average of 0.82 ton/ha to an average of 2.6 ton/ha.

Smallholder Farmer’s Contribution

During the agricultural campaign 2016/2017, the beneficiaries contributed, in the form of cash co-payment for the activation the e-voucher card, with approximately USD 640,000 (Table 6). This, together with changes from package A to B, is a clear indication of the trust created between beneficiaries and agro-dealers and between agro-dealers and input producers/providers.

The fact that in 2016 (or in the campaign 2016-1017) over 16,700 farmers were willing to copay the subsidy indicates that they think the e-voucher will help them to produce greater amounts of maize and beans.

mozambique electronic voucher

Women’s Participation in the e-Voucher Scheme

In the 2016/2017 campaign, women accounted for approximately 32% of all the e-voucher beneficiaries. There was noticeable differences within the provinces, with Sofala showing the highest percentage (approx. 53%) and Nampula/Zambezia showing the lowest (approx. 21%).

This difference might be linked with the fact that the e-voucher is relatively new in these provinces. In addition the farmers, especially female farmers, have more difficulties in having liquidity to cover the co-payment and are not yet fully aware of the benefits of using improved inputs and production techniques.

The e-Voucher Way Forward

The e-voucher scheme is successfully implemented in 13 districts of Mozambique reaching approximately 23,000 beneficiaries, a significant figure but still a small percentage of the potential smallholders that could benefit from the system.

Within the MDG1c Sub Program, FAO and the Government of Mozambique have noticed that smallholder farmers have the greatest appetite for financial mechanisms that help them afford agricultural inputs, such as seed and fertilizer. Given the fact that the majority of smallholder farmers in Mozambique are “subsistence farming”, the economic value for investing in smallholder farmers must be seen in the size of the population.

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As the MDG1c programme will come to a close in 2018, there is a great opportunity to ensure that enough financial resources will be available to continue the e-voucher with the existing smallholder farmers and hopefully to expand the system to a larger number of beneficiaries. The continuation of the programme will build and even stronger bond of trust between farmers and agro-dealers and between agro-dealers and input producers/suppliers will continue to strengthen a sustainable input distribution system at district level.

Electronic Voucher Results

A smallholder farm is “small” because resources are scarce, especially land, and using it to generate a level of income that helps fulfill basic needs and achieve a sustainable livelihood consequently require a high level of productivity, requiring in turn a significant level of investment.

Smallholder farmers are not by definition poor, and smallholder agriculture is not equivalent to “poverty”. A smallholder farmer can be highly profitable for a family if relevant investment are available for them to develop higher value crops, to process raw products, or to provide services to other farmers.

Smallholder farmers are principally family farmers and this has important implications for the organization of their production system:

  1. There is a close integration between productive assets and the patrimony of the family. This may induce decapitalization in the event of urgent, unpredictable and costly expenditures (for health, or for social obligations such as funerals). It may also allow some of the patrimony to be sold in order to increase income. This integration is a safety net but at the same time, it can undermine investments. The high level of risks and the modest means available imply that unpredictable expenditures can trigger and and/or maintain the impoverishment spiral.
  2. When products are sold there is pressure to first feed the family and repay loans or debts. Thus, the marketable surplus is reduced, cash incomes remain low and, consequently, investments through cash expenditures become difficult.
  3. Smallholders often make investments through family labour implying that the quality of life in terms of health and access to basic services is of primary importance for productivity, as well as education and training to improve family members’ skills, both in farm and non-farm activities.

If the e-Voucher is applied in combination with FFS and support to local seed production, it can contribute in the provision of the much-needed investment for smallholder farmers.

And if the investment is made with the intent of increasing food production (availability), promoting income generation (accessibility), promoting diversification of diets (utilization) and as a buffer to price volatility (stability) as in the case of the MDG1c Programme in Mozambique, the impact on the livelihood of smallholder farmers will be much more visible and tangible.

By Walter de Oliveira, Coordinator FAO Sub Programme MDG1C, FAO Representation to Mozambique. You can read the full publication at e-Agriculture Promising Practice – e-Vouchers increasing the use of improved agricultural inputs in Mozambique

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One Comment to “ICTforAg Case Study: Success with Electronic Vouchers for Farmers in Mozambique”

  1. Elvis says:

    I’d like to receive more documentation for improving my knowledge in agriculture value chain facilitation

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